Captive consumption of intermediate goods is dutiable, but extended limitation needs proof of suppression.

Captively consumed cushion compound/backing material used in manufacturing rubber products was treated as a distinct intermediate product falling within the relevant tariff entry, so its excisability was upheld. The Tribunal followed its earlier view that intermediate goods consumed within the same manufacturing process can still attract central excise duty, and treated the later rule amendment as consistent with that position. On limitation, it found no material showing suppression of facts or clandestine removal, and noted the departmental delay and belated notice. The extended period was therefore rejected and the demand was confined to the normal limitation period.

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Issues: (i) Whether cushion compound/backing material captively consumed in the manufacture of rubber products was liable to central excise duty. (ii) Whether the demand could be sustained for the unlimited period invoked by the department or had to be confined to the normal limitation period in the absence of suppression.

Issue (i): Whether cushion compound/backing material captively consumed in the manufacture of rubber products was liable to central excise duty.

Analysis: The product was treated as a distinct intermediate product emerging in the course of manufacture and falling within the relevant tariff entry. The Tribunal followed its earlier view in a similar matter and held that captively consumed intermediate goods were also liable to duty. The later amendment to the excise rule was treated as supporting this position.

Conclusion: The duty liability on the captively consumed cushion compound was upheld, against the assessee.

Issue (ii): Whether the demand could be sustained for the unlimited period invoked by the department or had to be confined to the normal limitation period in the absence of suppression.

Analysis: The Tribunal found no satisfactory basis for alleging suppression of facts or clandestine removal. It noted the long departmental inaction, the belated show cause notice, the delayed personal hearing, and the absence of material showing that the assessee had concealed the manufacture of the product. In these circumstances, invocation of the extended or unlimited period was rejected.

Conclusion: The demand was restricted to the normal one-year period and the extended demand was disallowed, in favour of the assessee.

Final Conclusion: The product was held dutiable, but the department was not permitted to raise the demand for the unlimited period and the demand was confined to the normal limitation period.

Ratio Decidendi: Captively consumed intermediate goods can be excisable, but the extended limitation for duty demand cannot be invoked without proof of suppression or comparable culpable conduct.

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